Mumbai: Concerned over the tight liquidity situation ahead of the festival season, the RBI plans to take steps such as bond purchases to ensure adequate supply of money for credit flows.
"The Reserve Bank of India is closely and continuously monitoring liquidity conditions and will take actions as appropriate, including open market operations, to ensure that adequate liquidity is available to support the flow of credit to productive sectors of the economy," it said in a statement.
The RBI said it currently injects about Rs 1.5 lakh crore into the system daily through the liquidity adjustment facility, the export credit refinance facility and the marginal standing facility.
Liquidity conditions have been tightening, as reflected in the hardening of yields in the government securities market due to uncertainties about the government's borrowing programme for the second half of 2013-14, it said.
Liquidity has also tightened due to prospective effects of banks' half-yearly account closure, seasonal pick-up in credit demand, festival-related demand for currency and sluggish deposit growth, the RBI said.
The government said on Monday it would borrow Rs 2.35 lakh crore from the market in the second half of the current fiscal of the total Rs 5.79 lakh crore projected in the Budget. In the first half, the borrowing stood at Rs 3.44 lakh crore.
To restore normalcy to financial flows, the central bank said it has also started a calibrated unwinding of exceptional steps taken since July.
In a separate notification later today, RBI lowered the minimum maturity period for banks to borrow foreign currency beyond 50 percent of their equity from three years to one year.
"On a review, it has been decided to lower the requirement of minimum maturity from three years to one year for the aforesaid borrowings made on or before November 30, 2013 for the purpose of availing of the swap facility from the Reserve Bank of India," it said.
However, RBI said that after the said date, foreign currency borrowing by banks beyond 50 percent of their tier I capital shall have to be of a minimum maturity of three years.